Oil surges more than 2% as Israel pushes deeper into Lebanon

Israel's ground forces crossed the Litani River and captured Beaufort Castle, shattering a six-week-old ceasefire and sending crude oil prices more than 2% higher.

Brent crude rose more than 2% to trade above $78 a barrel on Monday after Israeli Prime Minister Benjamin Netanyahu ordered troops to expand ground operations into southern Lebanon, breaking a ceasefire in place since mid-April.

"The market is pricing in a renewed risk premium as the conflict expands beyond the security zone and threatens to draw in Iran more directly," said Helima Croft, head of commodity strategy at RBC Capital Markets.

WTI crude climbed 2.3% to $74.80 a barrel in early Asian trading, while Brent advanced 2.1% to $78.45. Netanyahu said Israeli forces had crossed the Litani River, roughly 30 kilometers into Lebanon, and captured the historic Beaufort Castle — territory not held by Israel since its 2000 withdrawal. The escalation comes despite a nominal ceasefire agreed on April 16 and extended twice, most recently on May 15 for 45 days.

The widening conflict threatens to disrupt supply from a region that accounts for roughly a third of global crude output. Any direct Iranian involvement could imperil tanker traffic through the Strait of Hormuz, through which about 20% of the world's oil passes daily. U.S. and Israeli military officials are set to meet Lebanese delegates in Washington on June 2 for talks that now appear increasingly fragile.

The Israeli military said it struck more than 135 Hezbollah targets over the past day, including rocket launch sites in southern Lebanon and the eastern Beqaa Valley. Lebanon's health ministry reported more than 3,300 people killed since the conflict escalated in early March, while the United Nations said an average of 11 children were killed or injured every 24 hours in the past week. Over 1.2 million Lebanese have been displaced, according to the U.N.

The latest escalation marks Israel's deepest ground incursion into Lebanon in two decades. Netanyahu described the capture of Beaufort Castle — a 900-year-old Crusader fortress that Israel held from 1982 to 2000 — as a "dramatic change" in policy. "We have broken the barrier of fear," he said in a video address. "We are taking the initiative, we are operating on all fronts — in Syria, in Gaza, in Lebanon."

The conflict in Lebanon began after Hezbollah fired rockets into northern Israel on March 2 in solidarity with Iran, two days after the U.S. and Israel launched joint strikes on the Islamic Republic. Iran has made ending the war in Lebanon a condition for its own nuclear talks with Washington, which are being brokered by Pakistan. Those negotiations have also shown signs of strain, with President Donald Trump saying the U.S. was "not satisfied" with the progress.

For oil markets, the key risk is supply disruption. The last time a Middle East conflict threatened the Strait of Hormuz was in 2019, when attacks on Saudi Aramco facilities temporarily knocked out 5.7 million barrels a day of production — roughly 5% of global supply. While no such disruption has occurred this time, the premium embedded in crude prices reflects the market's assessment that the risk is rising.

This article is for informational purposes only and does not constitute investment advice.